After a house sale closes are the purchasers entitled to demand that an escrow account be set up from the seller’s proceeds so as to bring items up to current code?

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After a house sale closes are the purchasers entitled to demand that an escrow account be set up from the seller’s proceeds so as to bring items up to current code?

I sold a house that had a wood stove as the sole heat source. The purchasers made an offer on the house with this being the case. The purchasers lender required that a secondary, thermostatically controlled heat source be installed. I offered to put money in an escrow so that the purchasers could install the heat source of their liking post purchase. They insisted that I have the heater installed. I hired a professional and had a direct vent, wall mount propane furnace installed, plumbed the same way and installed in the same location as a ventless heater that was in the house when I originally purchased it but was later removed. After the installation the purchasers bank appraiser reinspected the home and

approved it for purchase. The buyers did a final walk through, then

proceeded to sign final papers and close on the deal. My attorney received

full payment and paid the difference on my mortgage. However, after I did not receive my check for the proceeds after nearly 3 weeks I contacted my

attorney to inquire and she then notified me that the buyers insist that I pay to have a new furnace installed because the brand new is in some supposed code violations. Do they have the legal right to have my money

withheld once the deal is clearly closed?

Asked on November 8, 2016 under Real Estate Law, New York

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 4 years ago | Contributor

No, they do not have the right to withhold any of your money, require an escrow, or require you to upgrade or pay for a system at this time. Once they close on the house, they buy it in the shape or condition it is in at that time; they cannot, after closing, insist on a credit, payment, escrow, changes, etc. If they refuse to give you the money, you can sue them for it, for breach of contract (for violating their obligation to pay for the house, once you turn it over to them)--even a code violation (assuming, for the sakeof argument, that there is a violation) allows this, since by closing after doing a walk through, they took the house subject to that violation.
The only exception to the above: if there was a problem which *couldn't* be perceived pre-closing (not merely that they did not happen to perceive it, but it was hidden in some fashion, so they could not reasonably have been able to perceive it, often called a "latent" defect) *and* you knew of the issue, but knowing of it, intentionally misrepresented (e.g. lied about or hid) the problem, that may be fraud; and fraud would give them grounds to recover money from you.


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